2010-07-28-2010-07-26-2010-08-02

Acquired noncore assets in Rockies and in Texas, including 31% WI in Garden Gulch Field in Co. Piceance Basin, WI in Baffin Bay Field in Texas, interest in Piper Petroleum Co.

As part of its strategy to focus on Vega, its primary asset in the Piceance Basin, independent E&P company Delta Petroleum Corp., Denver, (Nasdaq: DPTR) has sold certain noncore assets in the Rockies and in Texas to privately held Houston-based Wapiti Oil & Gas LLC for $130 million.

The assets include a 31% working interest in Garden Gulch Field in the Colorado Piceance Basin, a working interest in Baffin Bay Field in Texas, the company's interest in Piper Petroleum Co. and half of its working interest in Caballos Creek, Choke Canyon, Midway Loop, Newton and Norian fields in Texas and approximately 6,000 acres in the South Texas Eagle Ford shale. Wapiti will operate certain assets in Texas, including Newton and Midway Loop fields.

Delta chief executive Carl Lakey says, "The successful closing of this noncore asset sale allows us to significantly reduce our bank debt and to concentrate our capital and personnel on our operated Vega asset. With a stronger liquidity position and a more focused approach on our operations, we can now work towards increasing production and proved reserves in the Piceance Basin."

Wapiti president and chief executive Bart Agee says, "This acquisition positions Wapiti for significant future growth. On the heels of a successful sale of Wapiti Energy LLC's interest in the Conroe Field to Denbury Resources for consideration of approximately $430.7 million, we are eager to commence our next venture. As a well-capitalized firm with an attractive presence in the Rocky Mountains and the Texas Gulf Coast, we will continue to grow through acquisition and exploitation."

Delta received $112 million at closing, which will be used to pay debt and transaction costs. The remaining $18 million will be held in escrow until third party consents are obtained for the assignment of the company's working interest in certain properties by the end of August. Recently, the company amended its senior credit facility, reducing its borrowing base to $35 million. The amendment allows for capex of approximately $28 million for the third and fourth quarters of 2010.

The company reports it is also planning to sell additional noncore working interests in the Denver-Julesburg Basin of Wyoming, Colorado and Nebraska and also in its South Texas acreage.

Morgan Stanley & Co. and Evercore Group LLC were advisors to Delta.

KeyBanc Capital Markets Inc. senior managing director Jack Aydin believes the deal metrics are "immaterial" in view of the transaction being "a survival move" following Opon International's announcement on July 7 that it would no longer acquire a 37.5% nonoperated working interest in the Colorado Piceance Basin from Delta for $400 million.

Wells Fargo Securities LLC senior analyst David Tameron believes the asset sale is "a good start," but notes that the company will "still need to do more in order to meet upcoming debt payments."

Wells Fargo models Delta's current liabilities at $229 million and long-term debt at $255 million for a net debt to cap ratio at 50%. "This compares to pro-forma production of approximately 35 million cubic feet equivalent per day and proved reserves of roughly 100- to 110 billion cubic feet equivalent, based on a best estimate as lost production and reserve figures were not provided," Tameron says.

Delta Petroleum has core operations in the Rockies and Gulf Coast regions.